Next Obamacare crisis: Small-business costs?

Many small businesses will have to upgrade to plans that comply with new ACA rules. | Reuters

There have been some wildly inflated estimates about how many people could be affected and how seriously they’d be hurt, and most experts say there are too many variables to know for sure.

Republicans in Congress have circulated estimates, based on a Fox News story, that 80 million employees could lose their health coverage. That’s based on predictions from the American Enterprise Institute, but even the author of those estimates says it’s a rough guess and insists he wasn’t predicting that all of those people would lose their health insurance — just that they could be affected in some way, including higher premiums or changes to their coverage.

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Stan Veuger, a resident scholar at AEI and the author of the estimates, said his best guess is that 50 million to 80 million people could be affected by some kind of changes — and even that is a back-of-the-envelope estimate based on administration predictions of how many employer plans might lose their “grandfathered,” or protected, status. His main point, he said, was to argue back against Obamacare supporters’ claims that the law will leave the vast majority of Americans with workplace coverage untouched.

“I just don’t think we have enough information to come up with an exact number,” said Veuger. “It’ll play out in different ways, and we don’t know for which groups it will play out in which ways.”

Other health care experts say there are too many unknowns, like how many states and insurers will go along with President Barack Obama’s plan to let insurers extend pre-Obamacare coverage for an extra year — a plan that applies to small-business health insurance as well as individual coverage. (Right now, 27 states are allowing the extensions.) They’re also not sure how many small businesses will see rate increases rather than decreases.

But there’s enough of a chance that some businesses and workers could face disruption, they say, that it’s a good idea to start watching for the potential impact now.

And even though small businesses were already facing big premium increases and dropping coverage long before Obamacare, Democrats sold the law as a way to take that cost pressure off of the employers — so they’ll face a lot of tough questions from voters if the law appears to be making things worse.

“You own all the changes when you put in new rules,” said Claxton of the Kaiser Family Foundation.

Chris Foley of Abbot Benefits, a Houston-based insurance broker firm, said he expected about 75 percent of his clients to see “a noticeable increase” in premiums when they renew under the new Obamacare rules, while the other 25 percent would see their rates stay the same or go down.

The increases would be largely because of the new rating rules, he said, not because of the new minimum benefits. There are also new taxes and fees that help pay for the law — including the tax on health insurers and a fee to compensate insurers who attract a lot of sick people — but those are mostly factored into the premiums for 2014 already, he said.

John Arensmeyer of Small Business Majority, a group that supports the health care law, argues that any impact will be softened by the fact that small-group health plans were always better regulated than individual health insurance and the new minimum benefits are based on the ones that most small businesses already offer.

“You didn’t have as many outliers” as the individual health insurance market had, Arensmeyer said.

When the impact does come, it’s also likely to play out in a more muted way than the canceled individual policies. For one thing, the letters won’t go out to individual workers — they’ll go to the employers, and while some may say the current health plan is being discontinued, in a lot of cases they’ll say the employer just needs to upgrade the existing plan. And employers generally have insurance agents and brokers to work with, so they’ll have help researching their options if they’re facing a serious premium hike.

“It’s effectively the same thing … [but] it’s one thing to get a cancellation notice, it’s another to get a notice saying, ‘Here’s the changes we’re going to have to make to your plan to comply with the law,’” said Paul Fronstin, a senior research associate with the Employee Benefit Research Institute. “When you get a cancellation notice, it gives you this sense of panic.”

The political damage, though, would come if small-business employers tell their workers that their premiums are going up and it’s because of Obamacare. And there’s always the chance — though it’s too early to know how serious it is — that some small-business employers could decide it’s less expensive to just give workers some extra money and send them to the new health insurance exchanges instead.

There’s no reason that small businesses with fewer than 50 full-time workers would have to cover their employees anyway, since they won’t be subject to the law’s employer mandate — so there would be no penalty if those businesses want to send their workers to the health exchanges. They’ve held off for now, to give the exchanges time to work out their problems, but they might not show the same restraint later on after the exchanges improve.

“They’re either going to be searching for new coverage and getting pissed off that it’s getting more expensive, or you’re going to have businesses saying ‘to heck with it’” and sending their workers to the exchanges, the insurance industry official said.

Further complicating the issue, it’s not always going to be possible to tell what increases are happening because of the Affordable Care Act and what would have happened anyway, since employers’ health insurance premiums have been going up every year. “It’s hard to tease out … what’s due to the law and what’s due to continuing increases,” said Steve Wojcik, vice president for public policy at the National Business Group on Health.

And administration officials believe the SHOP exchanges will help, when they’re fully under way, because they’ll help bring down the administrative costs that small businesses have to pay for their coverage.

Still, insurers have been warning for months that the Affordable Care Act will lead to premium increases for some small businesses — it was part of their pitch to get employers to renew their old coverage early. That suggests they won’t be shy about blaming the law for every increase they can, which would affect how small-business workers view the law.

For example, here’s how Aetna sold its early-renewal option to insurance agents and brokers: “In 2014, changes set in motion by the Affordable Care Act (ACA) may lead to dramatic increases in premiums. Factors such as essential health benefits, maximum plan deductibles, the application of new taxes and fees, and new rating rules will combine to push insurance premiums up substantially for some small businesses. The rate impact can vary.” Aetna didn’t respond to requests for comment.

In the states that are allowing extensions, many small businesses may be able to renew their old policies for another year — as long as their insurers are offering extensions and their plans are up for renewal early enough. But the Obama administration “fix” won’t cover all of the businesses with December renewal dates. It allows extensions only for small-business and individual health plans that are up for renewal between Jan. 1 and Oct. 1.

And whenever the last extension is up, small businesses will have to deal with the transition to coverage that meets Obamacare standards, for better or for worse.

The renewals under the old rules, Foley said, are “just delaying the inevitable.”

This story has been updated to correct the description of small businesses and clarify how the new rating rules work.